Can you imagine organizing yourself with other people around the world without knowing each other? Can you imagine autonomously making your own rules and decisions, all encrypted in a blockchain?
Well, with DAOs, this becomes a reality.
What is a DAO?
DAO stands for decentralized autonomous organization. Today, DAO is well known in the world of blockchain and cryptocurrencies. In contrast to classic organizations, no central person or group determines a DAO. Instead, the management of a DAO relies on open-source code as rules of procedure embedded on a blockchain.
Decisions are made by all members of the organization who are also investors. The aim is to do without middlemen, a central “government,” and their possible abuse of power. In addition, invaders are offered a significantly smaller attack surface, primarily effective against state organizations. The program code aims to be neutral and immutable.
How does a DAO work?
A DAO is based on a programmable blockchain – an innovative contract platform. Smart contracts are used to organize a decentralized process.
The first and most crucial smart contract platform is Ethereum (ETH). The range of competing products is enormous. These contracts perform certain operations automatically after certain events.
The goal of a decentralized autonomous organization is the automated management of its dApps – decentralized applications that function largely independently. Both these dApps and the administration of a DAO itself are based on smart contracts. A DAO’s decision-making processes can be compared to a public company.
Owners feed the DAO with money and ideas. In the end, everyone benefits from the joint effort. There, shareholders make decisions that are then to be implemented by the management. A DAO also has shareholders with a larger or smaller voting share depending on their stake in the organization.
- The weight of votes is calculated according to a project’s share of governance tokens.
- Such tokens exist for each DAO. They legitimize the holder to participate in voting. The more tokens a person owns, the weightier their vote is.
- Each shareholder can submit proposals and call for a vote on their implementation.
- Changes are often specified by program code, but there is also the possibility of appointing individuals to implement them actively.
Basic properties of a DAO:
- The organization’s rules of procedure and its business are based on the program code.
- This program code is open source and works via a blockchain.
- A DAO can practically appear as a company but has no central management.
- The participants of the decentralized autonomous organization finance the enterprise and make all decisions themselves in direct elections.
- Any stakeholder can suggest a change and start a vote.
What problem does a DAO address?
The twentieth century saw some developments that led to increasing centralization.
Fiat money has been detached from its escrow and is, therefore, just paper money with a purely notional value. It was previously depositing gold or other physical materials that provided the necessary scarcity.
What are the benefits of DAO?
DAO members influence the funds allocated to the project by voting, which is why the project stands out for its transparency. In the future, decentralized autonomous bodies are expected to help coordinate among organization members and create new prospects for global integration.
In summary, a lot is expected from the organization’s development team to forge the appropriate smart contract to achieve the desired objectives and goals.
Anyone interested in this organization and wishing to subscribe to the project must invest in it to proceed to consensus decision-making.